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Why Economics is Considered as Science of Wealth?

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Pioneers of the science of economics defined it as a science of wealth. Adam Smith, who is known as father of economics, named his famous book on economics as “An Enquiry into the Na­ture and Causes of the Wealth of Nations.”

Thus, according to Adam Smith, economics enquires into the factors that determine wealth of the country and its growth. In this book Adam Smith analy­ses the factors that determine the growth of the volume of production.

That the emphasis of Adam Smith is on the wealth and riches of a nation are clear from the following quotation from his book. “The great object of Political Economy of every country is to increase the riches and power of that country.”

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As the wealth and riches of a country cannot grow without the proper utilization of its resources and this is what forms the subject matter of his book “The Wealth of Nations”. Thus, Adam Smith emphasised the production and expansion of wealth as the subject matter of economics. How­ever, Ricardo shifted the emphasis from the production of wealth to the distribution of wealth.

Ricardo writes:

“The produce of the earth—all that is derived from its surface by the united application of labour, machinery and capital is divided among three classes of the community, namely, the proprietor of the land, the owner of the stock of capital necessary for its cultivation, and the labourers by whose industry it is cultivated.” He further writes, “To determine the laws which regulate this distribution, is the principal problem in Political Economy.”

Besides Adam Smith and Ricardo, other classical economists too regarded economics as study of wealth. Thus, according to J.B. Say, a French classical economist, “economics is the science which treats of wealth.” Likewise, F. A. Walker writes, “Political economy or Economics is the name of that part of knowledge which relates to wealth.”

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Critical Evaluation of ‘Wealth Definition’ of Economics:

That economics is a ‘science of wealth’ has been severely criticised. In the seventeenth and eighteenth centuries when religion and ethics had a strong hold on minds of men, anything which was connected with wealth and riches was looked upon as sordid and mean.

Since economics was defined as study of wealth, it was dubbed by men of letters, especially Carlyle and Ruskin, as ‘Gos­pel of Mammon, a ‘pig science’ and a ‘dismal science’. It was alleged that economists have ignored the higher values of life and are hankering after formulation of laws which seek “to enrich both the people and the sovereign.”

Economics, it was said, has elevated wealth into an ‘object of scientific study.’ However, this is improper, unwarranted and biased attitude towards economics. Classical economists like Adam Smith, Ricardo and Malthus did not teach people to worship mammon or wealth.

They sought to expound the principles of wealth because it is wealth understood in the sense of goods or commodities, which is needed to provide physical subsistence to men and to raise their standards of living. How a nation wrests wealth from the niggardly nature, how this wealth is distributed and exchanged within the nation, these enquiries with which Adam Smith and Ricardo were concerned still remain even today an important object of economic science. By studying the laws of production exchange and distribution of wealth—useful goods or commodities, economics makes an important contribution to the promotion of social welfare. Therefore, it is un-jest to dub econom­ics as a sordid and mean science.

Besides, well-known topics of discussion in modem economics such as determination of in­come, employment and economic growth are intimately connected with the production and distribution of wealth with which Adam Smith, Ricardo and other classical economists were concerned.

As a matter of fact, it goes to the credit of Adam Smith and Ricardo that they addressed themselves to the vital problem of economic growth that brings about increase in the wealth or the production of goods. As is well-known, the main problem which confronts the developing countries like India is how to initiate and accelerate economic growth in their economies.

The abject poverty, huge magni­tude of unemployment and under-employment prevailing today in developing countries like India cannot be removed without expanding the production of wealth and distributing it equitably.

It is worth noting that the term ‘wealth’ has been differently interpreted by classical economists that is, a variety of meanings has been attached to the term ‘wealth’. However, most of the classical economists including Adam Smith, Ricardo and Malthus restricted its meaning exclusively to the material goods.

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That is, by wealth they generally meant material wealth. It must be remembered, however, that issue was not between materialistic economics preaching the accumulation of material goods and spiritual economics advocating higher values of life and spiritual desires of man. In other words, the classical economics was concerned with material wealth because it was easier to measure it accurately.

Malthus, a renowned classical economist, makes it clear as to why only material goods are regarded as wealth. He writes: “If we wish to attain anything like precision in our inquiries, when we treat of wealth we must narrow the field of inquiry, and draw some line, which will leave us only those objects, the increase or decrease of which is capable of being estimated with more accuracy.”

But in our view this does not truly reflect the views of Adam Smith. Adam Smith drew distinction between productive labour and unproductive labour. The labour which produced material goods was called “productive” and that which produced immaterial services such as the services of teachers, actors, dancers, musicians, etc., was regarded by him as “unproductive”.

Thus Adam Smith seems to think that economics was concerned with material wealth because it was the result of productive labour, the study of immaterial wealth (i.e. services just noted above) which are the result of unproductive labour lies outside the scope of economics. It is this viewpoint of not recognising immaterial services as the subject of study in economics that has been rightly criticised by L. Robbins and others.

According to Robbins, things which satisfy the wants of the people and are scarce in relation to the wants and therefore involve the problem of choice are worth studying in economics irrespective of whether they are material or immaterial. In fact, abilities and services such as teach­ing, singing, acting, providing music, curing diseases and bad health (i.e. the services of doctors) satisfy the important wants of the people and are also very scarce.

The economic aspects of these services, that are how to use them so as to attain maximum social welfare and how their prices are determined come under the purview of economics. Thus, in our view, classical economists by con­fining themselves to studying the laws of ‘material wealth’ and the neglect of immaterial services by them unduly restricted the scope of economics.

Further, keeping such immaterial things, as health, education, good administration outside the definition of wealth and therefore beyond the bounds of economic science shows that the classical economists did not realise and recognise the importance of these immaterial things for the economic growth of the nation, or to put in their own words, for the expansion of material wealth.

Several modern economists, especially Prof. Amartya Sen, a Nobel Prize winner in economics, have emphasised the role of education, health and good administration and have shown that they greatly raise the productivity of man and promote economic growth of the nation.

In view of their vital importance in raising production and productivity, good health, education and skills have in fact been called human capital by modem economists. That is why investment in promoting education, health, etc., has been called by modem economists as investment in human capital or investment in man.

Another drawback in making economics a “science of wealth” by classical economists is that in doing SO they laid conspicuous emphasis on wealth and put man to the secondary place m economic studies they did not lay adequate stress on man’s behaviour in relation to wealth.

Nor did they emphasise the end or ultimate objective of economics which is the promotion of human and social welfare. As a matter of fact, wealth is only a means to an end, the end being the welfare of man and society. To regard wealth as the be-all and the end-all of economic science is to make the means as the end.

The credit goes to Alfred Marshall, a prominent English economist, for shifting the empha­sis from wealth to man and also from wealth to welfare. According to him, economics is the one side a study of wealth; and on the other, and more important side, a part of the study of man He further writes, “Economics examines that part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being .

Another feature of definition of economics in terms of the study of wealth which is open to question is that it involves the acceptance and justification of property rights in various forms of wealth. “Despite the variety of meanings that have been attached to the term wealth by classical economists, almost all these meanings find some common ground with a definition of wealth as consisting in the objects of ownership.”

Classical economics with its emphasis on wealth regards the institution of private property as legally, morally, and naturally just. Gunnar Myrdal has shown that ideas of political and social philosophers who consider property rights as natural rights account for the classical, especially the Ricardian theories of value and distribution.” Read, a classical economist, has described economics as “an investigation concerning the right to wealth and ex­plaining what the rights and duties of men in society are with regard to property.

Commenting on this aspect of classical economics Kirzner writes, “According to Ricardo, economics shows how wealth is distributed among the factors of production; according to Reed, economics in so doing, at the same time lay down the law of natural rights of the factors of production on their several shares.”

But that the property rights have natural and moral basis is not accepted by many modem economists, especially those who believe in socialist philosophy. Rights to private wealth or property are conferred by the society and if the national interests so require they can be vested in the State or the rights of private ownership of property can be greatly restricted.

In India, various land reforms which involve restriction of private property in the ownership of land are advocated by the economists because they will help in increasing both output and employment. Thus the rights of private property or wealth are no longer considered as natural and moral rights.

Conclusion:

By considering the problems of production, distribution and exchange of wealth, classical econo­mists focussed attention on the important issues with which economics is concerned. However by restricting the definition of wealth to material wealth and the neglect of immaterial services m their economic studies they narrowed down the scope of economics. Further, they also showed a biased attitude by regarding rights to private property or wealth as natural and moral rights.